BECO Capital, a regional venture capital firm focused on technology investments in the Gulf Cooperation Council (GCC) countries, said during the Arabnet Conference taking place in Riyadh that Saudi Arabia’s growing population and consumer driven economy will give the entrepreneurial ecosystem access to exciting new investment opportunities over the next decade.
BECO Capital predicts that Saudi Arabia will develop the largest number of leading technology companies in the MENA region over the next 10 years.
A youthful population, high-levels of personal consumption, growing internet penetration and engagement will allow Saudi entrepreneurs to build some of the region’s most successful companies in the future. The next boom in the Saudi ecosystem will be in the technology space, an area of particular focus that is attracting many of the government support initiatives and venture capital funding.
Saudi Arabia as well as the UAE, continue to be the leading destinations for investment, reflecting healthy GDP growth and scale of opportunities in the two countries. Saudi Arabia ranked 26th amongst 118 countries on the PE Country Attractiveness Index in 2014. During the MENA Private Equity and Venture Capital Summit in Riyadh last month, Prince Turki bin Saud bin Mohammed, president of King Abdulaziz City for Science and Technology (KACST), highlighted that the Saudi government is focused on investment, evident both in the government’s active engagement in supporting local entrepreneurs and the recent rise of Saudi investment funds being deployed in foreign markets. Over SAR 8 billion were spent to date supporting Saudi startups with SAR 2 billion of these funds allocated by the Saudi government.
Amir Farha, Co-Founder and Managing Partner of BECO Capital, speaking at Arabnet Riyadh said: “Saudi Arabia is an economy that relies 90% on oil production coupled with its 30% intra-kingdom consumption of production. Nowadays we see that the Kingdom is focusing on becoming more efficient in energy consumption and in diversifying the economy. This is great news for tech, leading to a growth in the Saudi Ecosystem. Through product and service diversification, localizing technologies and expanding the pool of Saudi entrepreneurs, we can generate promising deals. The young Saudi population is heavily engaged, tech savvy and determined to solve local problems through technology. We have already seen some great deal flow and success stories with RemalIT (Kammelna), Harraj, UTurn and Unifonic (previously OTS) and this is just the start. It’s the local Saudi who’s building the exciting startups and solving local problems.”
Youth in Saudi represents over 50% of the total population, a rate higher than the global average. The overall population is estimated to have grown by 2.6% in 2014. These favorable demographics represent a great potential for the growth of consumption-oriented sectors. According to the MENA Private Equity and Venture Capital report, consumer-driven sectors are expected to remain the main focus of investments over the next 12 months, due to the underlying regional demographics and growing levels of discretionary spend. With a population of approximately 30 million, a GDP/Capita close to US$25,000, Saudi Arabia stands as the leader in the region in gross value.
In addition, the Kingdom’s consumers have widely adopted technology in their daily habits. With KSA ranked 30th worldwide in Internet penetration, 60% of the population online and growing at 11% a year, the opportunity to service this audience is significant. The Saudi population already relies heavily on social media to resolve its issues. YouTube has the highest rate of consumption by people in Saudi Arabia at 7 videos daily per user, while the KSA online user does the most tweets on a per capita basis. Social media and more specifically, online video, has become a key channel for consuming content. This adoption has created a new generation of tech savvy, commercially minded young entrepreneurs.
Yousef Hammad, Associate at BECO Capital said: “The Saudi tech ecosystem is emerging with multiple public and private initiatives supporting the Saudi entrepreneurs such as Badir, a KACST incubator and Oqal, an angel investment group which has completed 22 investments to date. The ecosystem is expected to grow with the support of government and private sector players. With more awareness of this new emerging asset class amongst traditional investors including family offices, high-net worth individuals and financial institutions, the startup ecosystem is expected to get a further boost and propel the next generation of start-ups. This will be backed by proper funding across all stages of the cycle, from angel investors, accelerators and incubators, venture capital firms, sovereign wealth funds (SWFs) and local institutional investors. Additional support and investments in the tech start-ups may produce the next Saudi home-grown tech titans for the region.”